Any nation which borrows/prints 20% of its GDP every year is essentially a
debt addict on welfare.

If you depend on borrowed money which will never be paid back and freshly printed
notes for 20% of your
expenses, you're on the dole. Since we
will never pay it back, the borrowing of the money is just a sham; stripped of
deception, it's welfare, a "gift" from future taxpayers to the current
beneficiaries of Federal largesse and swag.

The Federal government will borrow approximately 10% of the entire U.S. GDP--$1.5 trillion--
for fiscal 2010 and another $1.3 trillion for fiscal 2011. Barring intervention
from an alien race of superbeings, these stupendous deficits will continue until
Doomsday (implosion of the status quo).

Additionally, the Federal Reserve conjured up another
$1.5 trillion--$1.2 trillion squandered on mortgage-backed securities to prop up
the housing bubble from its ultimate retracement, and $300 billion in direct purchases of
Treasury Debt. Add in hundreds of billions thrown into Fannie Mae and Freddie Mac,
and indirect purchases, loans, guarantees and other props, and the true extent of the
"free money welfare" is staggering.

In our pride, denial and hubris, we as a nation still fancy ourselve a productive Empire.
That is a falsity, a facade, a delusion we cling to the way an addict clings to
his illusions: we're not addicted to debt, nosiree. We're just borrowing trillions of
dollars every year to get through a "rough patch."

If trillion-dollar deficits are required from now until Doomsday, that's an addiction to
debt. Claiming otherwise is the magical thinking of an addict in complete denial.

Let's set aside the pathetic bleatings of denial and the magical thinking which borders
on psychosis for a moment and face the painful truth: what will happen should the Federal
government stop borrowing and spending $1.3 trillion each and every year? What will
happen when the Fed stops spending $1.2 trillion each year to prop up the housing market?
What will happen when the Fed stops buying Treasuries to prop up the market for
securities which will never be paid back at anywhere close to current value?

What will happen when the nation has to live within its means, without resorting to
these trillions in welfare every year?

We all know what would happen: the U.S. economy, addicted to credit, debt and leverage,
would crash.

Like an addict going cold turkey, there is no way to restore health except to
end the addiction to borrowing and creating trillions in "free money."

What can we say about someone who believes that piling up more debt in an economy
already crushed by debt will somehow create new demand for more debt and thus "consumer
spending"? We would have to say that is magical thinking, the equivalent of thinking
that one can eat cheesecake, Big Macs, fries and sodas every meal and not gain weight.
It is magical thinking on a scale so colossal that it borders on psychosis--a complete
detachment from reality.

Welfare, addiction, denial, magical thinking: these are not foundations of a
healthy economy or mindset. They are a "sickness unto death," to borrow a phrase,
an alienation, a hubris, and a state of denial so profound that the sanity of the
addict/believer must be questioned.

That is the current mindset of the nation's leaders and much of its populace, who
prefer the grand illusions of permanent adolescence, a childlike state in which
they don't want any new taxes but they also don't want a single dollar of their entitlements
cut, either.

Can there be any more profound detachment from reality than this childish demand
that we live beyond our means indefinitely?

As spoiled, delusional teens eventually discover, adulthood requires realistic
assessments and trade-offs; there is no free lunch, no "borrow/print trillions each
year so I get every dollar of the swag that's mine." There will be consequences,
amd denial, addiction to debt and magical thinking are not strategies with any
great longevity.

It's painfully clear: any nation which borrows/prints 20% of its GDP either destroys
its currency or it defaults on it ballooning debts/obligations. There are no other
choices in the road ahead.

The permanent adolescence of the American voters insures that every politician
who dares to cut entitlements will lose, and every politician who seeks to raise taxes
by $1.3 trillion will also lose. (As they should, in my own view. As always, the
rentier-predatory Power Elites will largely escape taxation and thus the burden will fall
on the dwindling productive class/small business, creating a feedback which will
impoverish what's left of the productive citizenry and drive tax revenues ever lower.)

In response to this magical thinking, the politicos pander to the childish voters,
promising that yes, Virginia, we can "borrow our way out of this," fund essentially
unlimited entitlements and not raise taxes--in fact, we can cut taxes and reach
the same magical place even sooner!

There is no way addiction, denial and magical thinking on a national scale
will end happily.

If you haven't visited the forum, here's a fun place to start. Click on the link
below and then select "new posts." You'll get to see what other oftwominds.com readers and
contributors are discussing/sharing.

DailyJava.net
is now open for aggregating our collective intelligence.

"This guy is THE leading visionary on reality.
He routinely discusses things which no one else has talked about, yet,
turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

NOTE: contributions are acknowledged in the order received. Your name and email
remain confidential and will not be given to any other individual, company or agency.

Thank you, Mark W. ($100), for your outrageously generous contribution
to this site.
I am greatly honored by your support and readership.

Thank you, Rhone, ($120), for your ongoing stupendous generosity
to this site.
I am greatly honored by your support and readership.